Growth stocks are of particular interest to investors who are looking to make an alpha. With an ‘alpha’ we refer to a premium on top of the market growth, meaning that you are outperforming the market. This results in higher returns, which is interesting to any investor. However, with a higher alpha also come higher risk. How do you make sure you invest in the right stocks? How do you know if the company is meeting the expectations? We will dive into these questions and learn how a stock tracker can help you understand the stocks in question.
How do you invest in growth stocks?
When investing in growth stocks, you need to determine the focus areas you want to invest in. There are many options out there, but the most common are related to technology. Since the past decade, the options related to technology are expanding. Ranging from payment providers to many Software as a Service (SaaS) solutions, the market has been flooded. This also makes it harder for investors to find the right stocks.
Think about the addressable market
To identify what works for you, start with the addressable market when investigating stocks. What would their potential target audience be? Is it large enough to make it grow? How are their competitors doing? This allows you to get a good idea of the growth trajectory.
Who is their management?
What we often see is that companies that are managed by their founders are doing significantly better than a management team filled with externals. The reason is the culture that brought them to a certain point is still being executed by the founders. Therefore, it is important to take into account the management in your decision-making.
Service offerings
The company that you are focusing on might have one or more products or services. Does it scale? Are there any other products they can release in the future? The potential of these services needs to be explored to understand the true potential of the company. You can identify this also by reading the materials available on their website. For example, quarterly earnings often include statements about the growth trajectory and where the organization wants to move towards.
Leverage a stock tracker
Most of the information that we have discussed is available in a stock tracker. This is an application that provides real-time stock prices, but also includes news, quarterly earnings reports, and exchange overviews.
Want to learn more about stock tracking?
There are many applications out there that can do the trick. As an investor, it is relevant to ask yourself questions that can lead to a specific set of requirements. For example, what is the stock portfolio you are looking at? Do you also have cryptocurrency? Are you interested in fees from brokers and exchanges? Applications such as Delta can provide you with all those features, but there are also lightweight options available. This could be an option when you just want to have a simple tracker that does not provide too much insight to keep you focused. However, such trackers could be less interesting when looking at growth stocks or the volatile crypto market.
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